Locum Tenens Physician Deductions: The Tax Home You Must Keep, the Agency-Paid Lodging, the Per Diem, the Licenses in Four States, the Malpractice Tail, the Solo 401(k), and the Health Field Phase-Out

A locum tenens physician is a contractor who travels to where the hospitals are short, paid on a 1099 by a staffing agency, with lodging and flights often arranged by the agency and malpractice coverage often included. The deductions are real — travel, licensing, education, retirement, insurance — but they depend on one thing many locums get wrong: a tax home. A physician who lives on the road with no permanent base has no tax home, and all the travel becomes personal.

The tax home

Travel expenses are deductible only when the physician is away from a tax home — a regular place of business, or, for someone with no regular place, the residence they maintain and return to, with real duplicated living costs. A locum with no regular place of business applies Publication 463's three-factor test (from Rev. Rul. 73-529): she does part of her work in the area of her main home and lodges there while doing it; she has living costs at that home that are duplicated while she is away; and she has not abandoned the home area (family lives there, or she often lodges there). All three make the Florida home her tax home and each assignment travel away from it; two of three is a facts-and-circumstances call; one makes her an itinerant. A locum who gives up the apartment and lives in agency housing year-round is an itinerant with no tax home — no travel deduction, and agency-paid lodging becomes income. An assignment at one location realistically expected to last more than a year is indefinite and makes that location the tax home, however long it actually lasts; one realistically expected to last, and that does last, a year or less is temporary (the one-year rule in Section 162(a)).

Agency-paid lodging and travel

When the agency books and pays for flights and housing, the physician has neither income nor a deduction, provided the arrangement is an accountable plan equivalent — business purpose, substantiated, no excess. When the agency pays a stipend, the stipend is income on the 1099 and the physician deducts the actual lodging and travel costs against it. Meals are deductible at 50 percent of either the federal meals and incidental expenses (M&IE) per diem rate for the location or actual costs, whether or not the agency pays lodging; lodging she pays herself is always deducted at actual cost. The per diem is often the simpler choice because meal receipts are not required — dates, places, and business purpose still are.

Licenses, DEA, and credentials

State medical licenses — often several, maintained for the states where assignments recur — license renewals, the interstate licensure compact, DEA registration, state controlled substance registrations, hospital credentialing fees, and background checks are deductible. The initial license to enter the profession is not; additional state licenses for an established practice are.

Malpractice and the tail

Agencies commonly provide malpractice coverage for the assignment, often claims-made. A physician who buys her own coverage deducts it, and a tail policy — covering claims filed after a claims-made policy ends — is generally deductible when paid. A tail bought when leaving an employer for locum work, often a large one-time premium, covers the employment years; deducting it against locum income is a position to document, because unreimbursed employee expenses are not deductible.

Education, dues, and equipment

Continuing medical education, board certification and maintenance, specialty society dues, journals, and conference travel are deductible. A laptop, a stethoscope, loupes, and other equipment under the de minimis threshold are supplies; scrubs and lab coats (not suitable for ordinary wear) are deductible, ordinary clothing is not.

Retirement and health insurance

A locum with no employer plan contributes to a solo 401(k) as both employee and employer, or to a SEP IRA, with the limits scaled to net self-employment income — for 2026, up to $24,500 of employee deferrals (plus an $8,000 catch-up at 50 or older, or $11,250 at ages 60 to 63) and up to $72,000 of combined employee and employer contributions before catch-ups — among the largest deductions available. Health insurance premiums are deductible above the line for the self-employed (Section 162(l)), for months she is not eligible for an employer-subsidized plan and up to her net self-employment earnings. Contributions to a health savings account with a qualifying plan are deductible.

Nonresident state returns

Each state with an income tax taxes the fees earned there; a locum on three assignments in three states files three nonresident returns. A Florida resident bears those taxes with no home-state credit. Agencies generally do not withhold state tax from 1099 fees; the physician reserves for each state. Some states exempt short assignments under de minimis rules.

The health field phase-out

Medicine is a specified service business. A locum with taxable income above the 2026 threshold — $201,750, or $403,500 joint — begins to lose the qualified business income deduction, and loses it entirely above $276,750 ($553,500 joint). Large retirement contributions and the health insurance deduction reduce taxable income and can bring a physician into the range or below it.

Worked example. A hospitalist takes four locum assignments of six to ten weeks in three states, earning $340,000 on 1099s, while maintaining a Florida home she returns to. The agency books her flights and housing (no income, no deduction); she deducts 50 percent of the meals and incidental expenses per diem for 210 days away (roughly $7,100 to $9,700 at the $68 to $92 continental rates). She deducts $3,600 of license renewals and a new state license, DEA registration, $4,100 of continuing medical education and board maintenance, a $14,000 tail policy from her former employer's coverage (a position she documents, as above), $18,000 of health insurance premiums, and $69,000 of solo 401(k) contributions (within the $72,000 limit, which her net earnings support). She files nonresident returns in the three assignment states. If she files single, her taxable income after these deductions and the $16,100 standard deduction is roughly $190,000 — below the $201,750 threshold — so the specified-service limit does not apply and she takes the full qualified business income deduction, about $38,000 (20 percent of taxable income, the binding limit). Without the retirement contributions and health insurance deduction, her taxable income would have been near or above the top of the phase-out range.

Official sources

The IRS explains: “If you don’t have a regular or main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. As an itinerant, you can’t claim a travel expense deduction because you are never considered to be traveling away from home.” — Internal Revenue Service, Publication 463 (2025), Travel, Gift, and Car Expenses, https://www.irs.gov/publications/p463

The GSA explains: “We establish the per diem rates that federal agencies use to reimburse their employees for lodging and meals and incidental expenses incurred while on official travel within the continental United States.” — U.S. General Services Administration, Per diem rates, https://www.gsa.gov/travel/plan-book/per-diem-rates

The IRS explains: “The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities.” — Internal Revenue Service, One Participant 401k Plans, https://www.irs.gov/retirement-plans/one-participant-401k-plans

Related guides

• Locum Tenens Physician Entity and Estimated Taxes: The Sole Proprietor, the S Corporation at the Right Income, the Agency's W-2 Option, the Nonresident States, and the Quarterly on Assignment Income
• Business Trips: What Travel Costs You Can Deduct
• Health Insurance Deduction When You Work for Yourself
• Solo 401(k) vs SEP IRA vs SIMPLE IRA
• What Is an SSTB? Specified Service Trade or Business

Next step

Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. Our U.S. Tax Desk documents the tax home, tracks per diem days by assignment, and files the nonresident returns a locum schedule creates. See pricing or book a free fit call.